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Stratasys Can't Be Stopped

A look back at the 3-D printing leader's big news and major moves.

Shares of Stratasys(Nasdaq: SSYS) hit an all-time high yesterday. Let's take a look at how it got here to find out whether there are still clear skies ahead.

How it got hereStratasys was one of the market's biggest movers yesterday, but the reasons remain murky. I doubt shareholders are complaining about their 13% gain, which once again gives Stratasys a clear lead in this year's share-price race over 3-D printing rival 3D Systems(NYSE: DDD), which has been hitting 52-week highs of its own all year as well:

Stratasys, for its part, has been in the midst of a compelling industry-consolidation battle with 3D Systems. 3D Systems has made a number of small-to-midsize acquisitions in recent years, gradually bolstering the scope of its offerings. To answer that challenge, Stratasys dove right into the deep end by merging with Objet, which had been a sort of de facto No. 3 in the small 3-D printing industry. Investors have been understandably excited about this competition, since this new alignment could easily capture half of the entire 3-D printing market.

What you need to knowThe difference between 3-D printing companies and old-fashioned printer makers couldn't be starker. The twin titans of 3-D are richly valued, but have backed that up with impressive growth rates and strong net margins for a hardware manufacturing enterprise. Lexmark and its peers, on the other hand, are priced like they've already got one foot in the grave:

Company

P/E Ratio

Price to Free Cash Flow

Net Margin (TTM)

3-Year Annualized Income Growth

Stratasys

63.0

133.3

12.1%

71%

3D Systems

52.7

45.0

13.4%

227.1%

Lexmark

5.1

6.1

7.2%

26.9%

Hewlett-Packard(NYSE: HPQ)

7.5

7.9

4.2%

(12%)

Xerox(NYSE: XRX)

8.0

6.7

5.7%

16%

Source: Morningstar. TTM = trailing 12 months.

The three paper-printing companies saw extreme price-to-earnings compression over the past half-decade as the market shifted its attentions to the hotter (and more versatile) 3-D printing industry:

HP had a chance to regain relevance when it partnered with Stratasys two years ago. That alliance went nowhere, as the "entry level" machines cost nearly as much as a compact car and were only offered in Europe. Xerox hasn't been relevant in a long time. Investors were once as keen on these companies as they are on Stratasys today -- something to keep in mind for the future.

We're still very early in this industry's growth phase, so it's not fair to anticipate it becoming old hat already. However, just because a market has boundless potential doesn't guarantee that any company will claim a big piece of it.

What's next?Stratasys hasn't suffered any real downturns in a long time. Every stock falls eventually, but the best companies can push themselves through weaknesses to reach even greater heights. If you believe that Stratasys has a strong case for long-term growth, its high-flying ways shouldn't turn you off today.

The Motley Fool's CAPS community certainly believes in Stratasys. Our community's given the stock a perfect five-star rating, with 95% of our CAPS players expecting the company to keep heading higher.

Author

Alex Planes specializes in the deep analysis of tech, energy, and retail companies, with a particular focus on the ways new or proposed technologies can (and will) shape the future. He is also a dedicated student of financial and business history, often drawing on major events from the past to help readers better understand what's happening today and what might happen tomorrow.